International connectivity – a big issue, involving big money
To the casual observer, the Internet and telephone networks around the world
are seen as one. In fact, we take international connectivity of all types for
granted. We make and receive calls between fixed and mobile networks, expect the
Internet to provide us with a wide variety of complex applications and services,
and expect everything to work together, wherever we are without thought to how
traffic is channeled across the world.
In fact, this apparently seamless single network – often called the world’s
largest machine – is constructed of hundreds of thousands of sub-networks. The
world of telecom is fundamentally and irrefutably an interconnected world:
operators and service providers connect to users, but they also connect to each
other across the globe. In this architecture, networks interconnect with each
other in complex ways to achieve the overall goal of seamless connectivity. ITU
is at the forefront – particularly in the world of telephony – to ensure that
interconnection is achieved properly, reliably, and in a standardized way
replicable by others.
Three decades ago, most countries had a single telecommunications administration
– often owned by the state. The types of data networking through the Internet
and mobile communication we know today barely existed. But an explosive course
of deregulation has meant the market has created many thousands of new service
providers, and technology has generated a wealth of new applications. All these
networks must be interconnected, however. Fixed networks may connect to other
fixed, or mobile. Mobile networks may connect to other mobile networks or to
fixed networks. Internet networks need to connect everywhere.
Today, relationships between players in the market are much more complex, but
they still need to be managed. Networks interconnect on both a national and
international level to ensure ubiquitous service everywhere. On a national
level, industry rules and national regulations apply. On an international level,
the principles are the same, but in the absence of a formal global
communications regulator with the power to enforce principles or mechanisms on
an international basis, countries and operators must negotiate general
principles and agreements with each other for the benefit of everyone.
Who pays?
But it’s a fact of life that when someone, somewhere, uses a telecom service
they want and is paying a bill for it, the interconnected service providers
involved in that service must also somehow settle the billing issue with each
other. The issue may seem arcane, but it is critical, simply because the
resulting financial flows are vast: many billions of dollars are transferred
around the industry annually –between operators, as well as between countries.
Settlement processes are sufficiently complex to warrant that an ITU-T Study
Group is assigned to examine tariff and accounting principles on a permanent
basis.1
International telephony interconnection and charging have developed largely
through governing principles established by the ITU. These principles have led
(in most cases) to a structure where interconnecting service providers negotiate
on a bilateral basis to manage their accounting arrangements.
ITU is the custodian of international treaty-level instruments such as the
International Telecommunication Regulations (ITRs) which are a global binding
treaty specifying the type and nature of international connectivity, billing and
accounting. The ITU is currently investigating the potential need to update such
instruments within a timeframe for 2012. Also of particular focus is the
possible updating of the so-called D series2
of Recommendations – effectively a companion to the ITRs – that the ITU-T
publishes to standardize international interconnection practices by service
providers.
Complications may arise at the international level, especially when networks in
developed countries interconnect with those in developing countries. Traffic,
demand, pricing, charging and financial flows are not only inter-linked issues,
they are also closely linked with the growth in connectivity itself to
underserved populations around the world, enabling them to join the digital
economy. Some of the key issues that have been mentioned are:
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High international gateway costs in many countries are a
major impediment to development, as they often keep the prices
of Internet (and telephony) connectivity offered to consumers
high as a result. Lower costs on the other hand could help
generate more subscribers, more traffic, larger networks and
ultimately more investment, creating a virtuous cycle. In this
way, interconnection is linked to network growth, universal
service issues and other aspects of what are known as “network
externalities”, where network growth benefits each user of the
network. But how should service providers be encouraged under
interconnection policy to lower charging and tariff regimes
across borders?
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Interconnection methodologies between service providers on
the Internet and those on traditional telephony networks have
evolved very differently. For all service providers, however,
the appearance of Internet Protocol (IP)-based next-generation
networks (NGNs) may radically change the network infrastructure
picture. NGNs may use different interconnection strategies as a
result of improved architectures.
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The new picture is very complex. An application sought by a
user which may appear to be a single entity may in fact involve
many different network services in combination, each with its
own characteristics. Additionally, charging and accounting
methodologies may change, but have potential implications for
other aspects of networking such as quality of service (QoS).
How should all these factors be assessed?
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The international connection of mobile networks is also a
challenge. Roaming and other charges – particularly in data
traffic delivered across borders – remain extremely high in many
markets. Meanwhile, mobile termination rates, the charge made by
the receiving operator to complete a call, have also been under
scrutiny by legislators in the European Union and elsewhere. In
this sense, is there a need for regulatory intervention in the
international connection of mobile networks? And if so, how
could it be regulated?
1 ITU-T Study Group
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2 ITU-T Series D:
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Tariff and accounting principles including related telecommunication economic and policy issues
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